66th 2Q Business ReportMar. 1, 2023 - Aug. 31, 2023

CEO Interview

Making upgraded overseas bases andbolstered environmental management
the drivers for accelerating further growth.
In the ﬁrst quarter of the 66th reporting period, net sales were up 6% YoY and operating proﬁt rose 79%
YoY due increased sales in overseas markets and progress in correcting selling prices. By division, net
sales in the Functional Fluids Division increased 10% YoY due to steady growth in markets other thanChina. The Hot Melt Adhesive Division also saw a further increase in market share, with a 12% increasein net sales due to a particularly strong performance in terms of inquiries in Southeast and South Asia.
On the down side, the Synthetic Lubricants Division saw a 39% drop in net sales of products such as harddisk surface lubricants due to a slowdown in corporate investment in data centers. Net sales in the Liquid
Parafﬁne & Sufonates Division increased 5% despite diminished demand from the domestic polystyrene
industry. Though these results are by no means satisfactory indicators in this ﬁnal year of the 9th
medium-term management plan, we feel that a major achievement was accomplished in terms of the
progress made during the ﬁrst half of this ﬁscal year in establishing a framework that will be key to our
medium- to long-term growth.
Firstly, regarding the upgrading of our overseas bases, having secured a manufacturing base through theacquisition of a local company in the US market, we anticipate this giving momentum to the expansionof sales channels to not only Japanese companies but to US companies as well. In the Chinese market, amanufacturing base for functional ﬂuids is under construction in Zhejiang Province and scheduled tostart operations in November. This will put in place a foundation for the supply of products that can meetthe needs of new energy vehicles. The second point that merits mention here is the progress we havemade in bolstering our sustainability management. We are promoting the decarbonization of our
products with the aim of reducing greenhouse gas (GHG) emissions 46%* by 2030 and achieving carbon
neutrality by 2050. Our R&D Departmentʼs crucial ﬁrst step toward this goal was setting the speciﬁcnumerical target that 50% of our product sales would be sustainability transformation (SX) products by
2030, and thereby enabling us to indicate the direction the R&D Department should aim for in the future.
We are committed to rebuilding on our portfolio by advancing the development of eco-friendly products.
In the second half of the ﬁscal year and beyond, as we draw on our strengths the focus will be on both thefurther strengthening of our R&D system at each of our bases and expansion of our market share. And as
illustrated by the pursuits such as the MOLGADC Project described on the inside of this report, we will
also strive to create new businesses by promoting collaboration with a diverse array of partners. As weenvision expansion and growth strategies from a medium- to long-term perspective, we hope to parlay
our efforts into a leap forward during the 10th medium-term management plan period starting nextﬁscal year.
* Comparisons to 2013

CEO, Representative Director, President

Motohisa Morozumi

MORESCO

New Actions
We at the MORESCO Group make a point of keeping theawareness of our employees up-to-date so that we canthe enhancement of technologies in the boundary area andThis report will acquaint the reader with details of the Group's

Greater commitment to making all of our businessactivities based on a respect for human rights

Making this an organization trusted ever more internally andexternally by ensuring that our commitment toward respecting
human rights is present in all of our business activities.
Hirofumi Fujimoto

CFO, Director, Senior Executive Ofﬁcer

In the work we do to move forward with sustainability management, we place
importance on the human rights of all people affected by our business and thisyear established the MORESCO Group Human Rights Policy. In doing so, we
are articulating anew our commitment to respect for human rights. We havethus far always remained true to our commitment to making this anorganization where each and every employee feels comfortable doing theirwork while able to fully demonstrate their abilities. In addition, we have also
predicated our operations on ensuring that business activities are done in amanner that is fair and in good faith, based on relationships of trust and mutual
respect with our customers and local communities. However, these were allcommitments made by a tacit consensus.
As our business bases have expanded globally and diverse human resources
assemble at an accelerating pace within our ranks in recent years, we

determined that a clearly stated and common set of rules was warranted. This
led to the establishment of this new human rights policy, which we will employ
to raise awareness of the importance of human rights. In speciﬁc terms, we willﬁrst promote education both internally and externally to foster a uniﬁedawareness of the proper norms throughout the Group. This will provide our
employees and customers with a greater sense of assurance.
Furthermore, our commitment to human rights due diligence (DD)encompasses the investigation, monitoring, and implementation of corrective
measures to prevent and mitigate transgressions such as human rights
violations. We will report on the progress and results of these efforts in a phasedmanner. Over a broad spectrum, we will continue to live up to the trust placedin us by society as we pursue the activities that make us a company that offers
maximum respect for shareholders, employees, and all other stakeholders.

Status of Efforts to Achieve Sustainability Management
Mar. 2022

Nov. 2022

May 2023

MORESCO Group
Sustainability
Policy established

Information disclosure
based on TCFD
recommendations

MORESCO Group
Human Rights Policy
established.

We clearly spelled out the values andgoals we feel should be valued more by
our executives and employees incarrying out work such as theaddressing of sustainability issues. The
identiﬁcation of seven materialities
was among the work done in this area.

Regarding the impact of climatechange on our business, we disclosed
information and scenario analyses infour areas: Governance, Strategies,
Risk Management, and Indicators andTargets.

Announcing our commitment to thepromotion of respect for the humanrights of all individuals affected by thebusiness activities of the MORESCO
Group, we established a basic policy
regarding human rights.

NOW

Creation of a humanrights due diligence(DD) system

Going forward, we will identify thepossible negative impact our businessactivities could have on human rights,
and conduct risk assessment andidentiﬁcation to prevent and mitigate
any such impact.

Highlights of the YearMar.

Certiﬁed as a Health & Productivity Management
Outstanding Organization 2023
(large enterprise category) for the third consecutive year

We have been recognized as acompany with health managementthat is exceptionally outstanding,as evidenced by practices such as
initiatives that address community
health issues and health promotion
efforts. This furthers our resolve topromote the health of our employees
and their families.

Japan Society of Mechanical Engineers
Mar. The
Kansai Branch Award (Research Award) 2022
Joint research between Tsuyoshi Shimizu, General
Manager of MORESCOʼs Synthetic LubricantsDivision, and Kansai University has resulted in theestablishment of a method for measuring ultra-thinﬁlm elastic modulus on the nanometer order.
The company received the Kansai Branch Award(Research Award) of the Japan Society of MechanicalEngineers for our contribution to the developmentof mechanical engineering and the machine industry.

internal environment of the company and thecontribute in wide-ranging ways to society throughthe continuous supply of eco-friendly products.
reforms in the non-ﬁnancial and R&D domains.

An approach to research and technology that
does more to put the environment ﬁrst

Update the organization of and attitudes of
those in our R&D Department to open up
new roads to our next ﬁelds of business.
Yasuo Sakane

CTO, Director, Managing Executive Ofﬁcer

Amid a society that continues to face major changes, we are strongly aware of
the need to engage in meeting the SDGs and signiﬁcantly shift our portfolio.
Toward that end, we have revamped our R&D structure, which was morecentered on business divisions, into a new cross-divisional organization thattackles company-wide issues and thereby can stimulate the development of new
businesses. In addition, we will contribute to meeting the SDGs as we
collaborate with external parties such as overseas subsidiaries, partnercompanies, and universities.
In hopes of aligning the attitudes of our people across divisions within this new
structure, we formulated a basic concept that deﬁnes the very purpose of the
R&D Department: "Using the power of kagaku for the well-being of people andthe planet." The word kagaku was used because it means both chemistry andscience in Japanese, while "well-being" is intended to represent ourcommitment to helping people the world over perk up and proactively achieve
good health and happiness. At the same time, the vision "We are a specialist in
the boundary area" indicates what we aspire to be as we move beyond theconventional boundary area centered on surface chemistry and into areas thattranscend chemistry.
Based on these completed versions of our Purpose and Vision, we will move
forward by promoting business development centered on the MOLGADC Projectthat engages in seven priority research themes. Each and every individual will
not only consider the immediately visible needs of customers, they will think inlight of the Purpose and, if needed, provide alternative ideas to those customer
demands that are not readily addressed by the Purpose. This is one of many
ways in which MORESCO will aim to grow into a group of professionals with thewill, ﬂexibility, and technical capacity to pursue what is of true value to society.

Based on our Purpose and Vision, we will promote the MOLGADC Project to open up new ﬁelds of business
Purpose of the R&D Department (why we exist)

Using the power of kagaku for thewell-being of people and the planet

Business Division C
Overseas Subsidiaries
Partner Companies

R&D Department＋
R&D Conference

・Solving basic problems
・Solving common problems
・Considering future themes

Universities

M

Application of VOC removal technology to high value-added materials

O

Development of non-Si photovoltaic materials

L

Continued development in the ﬁeld of life sciences

G A In-house production of polymers from non-petroleum-derived raw materials
D

Application of digital transformation technologies

C

Promotion of circular products

Returns to existing or
new business divisions

Business Division B

We are a specialist in the boundary area
Creation and assessment of
new technologies, new basic
technologies, and new products

Business Division A

Vision of the R&D Department (what we aspire to be)

the 73rd (FY2023) Industrial
May Received
Technology Awardthe 2023 Outstanding Paper
Jun. AwardedAward of the Adhesion Society of Japan

Kazuya Tate, Atsushi Uehigashi, andTakahiro Imamura of our Device
Materials Division received the Industrial
Technology Award for the developmentof MORESCO-SuperDetect, a gas
transmission rate measuring systemthat enables high speed, high sensitivity,and high measurement efﬁciency.

Masaru Kotera of our Synthetic
Lubricants Division received theOutstanding Paper Award of theAdhesion Society of Japan for apaper for which he was lead author.
The paper elucidates a previously
unexplored mechanism behind theformation of adhesive properties
in oleﬁn-based hot melt adhesives.

Products
News

MORESCO Green SX adding momentum
to the move toward environmental
management the world over.

Promoting the development of products that are less of a burden
to the environment, we are contributing to our customersʼ further
implementation of sustainability management.
The products the MORESCO Group has continued to provide contribute to the sustainability
sought by our customers in ways such as improving the global environment and factory
environments. And as the demand for environmental management for companies is increasing
ever more rapidly in recent years, we have started to offer a certiﬁcation system called MORESCO
Green SX for more robust product development and idea proposals to meet such needs.
Based on the assessment of the entire life cycle of a product, from raw material procurement todisposal, our Sustainability Committee deliberated to identify the products that makecontributions of particular signiﬁcance to the seven materialities that comprise the initiatives we
aim to achieve. In addition, feedback from outside experts was factored in, enabling us to offer
certiﬁcation as SX brands and make this information publicly available. This system has paid off
major dividends in the form of making it easier for customers to preferentially select our SX
products. With many of our business partners engaged in a process of trial and error in the quest
to improve sustainability, this system has made it easy for them to reafﬁrm the value of our SX
products while also leading to purchase of the products by companies for the ﬁrst time. And with
MORESCO, the Green SX certiﬁcation system has become a clear indicator of our chosen
direction, thus accelerating the development of products for decarbonization. Our goal is for SX
products to account for 50% of our sales by 2030.
We will continue our efforts to develop products and technologies that enhance the corporate
value of both our company and our customers as we update our certiﬁcation criteria in
accordance with changes in the internal and external environment.

MORESCO Green SX Contribution Categories

Contribution toindustrial development

R&D Department

MORESCO Green SX the Process of Certiﬁcation
Proposal and application

Evaluation and review

MORESCO Green SXInternal Review Board
Chairperson CTO (Chief Technology Ofﬁcer)
Members Directors, Executive Ofﬁcers, headsof each division, head of the R&D
Department, head of the Corporate
Sustainability Department
Secretariat Corporate Sustainability Department

Certiﬁcation

Sustainability Committee

Health and safety

Executive Ofﬁcer, General Manager,

Opinions from external
experts

Improvement of working
environments

Energy saving Environmental conservation

Katsuhito Fukuda

Each business division

CO2 emission control

Details about MORESCO
Green SX certiﬁed products
are available here.

MORESCO products pave the way for the new normal
in recycling-oriented society.
To accommodate the increased global demand for decarbonization of late,
MORESCO has appointed a new director in charge of circular products and is
promoting ideas for enabling the recycling of used products derived frompetrochemical raw materials. The recycling of ﬂame retardant hydraulic ﬂuid, an
instance of a project we have been working on from before, has made possible therecovery of used ﬂuid and its conversion into raw materials for production, an
accomplishment that has earned us accolades from our customers.
At the same time, as we are undertaking the challenge of determining how toaccelerate this initiative, we hope to deepen and expand our recycling technology for
extracting and reﬁning components from used products for the conversion of
conventional products into circular products, thereby demonstrating our uniqueexpertise as a specialist in the boundary area. It bears noting that many of ourcircular product ideas involve issues and processes that we cannot solve on our own,such as improving the efﬁciency of used product collection. By involving ourcustomers in the building of a system of cooperation that spans the entire value
chain, we aim to realize a new business model one step at a time.

Naohiro Kanematsu

Executive Ofﬁcer in charge of circular products
General Manager, Functional Fluids DivisionMajor Consolidated Financial Indicators
Net Sales and Operating Proﬁt to Net Sales Ratio
During the second quarter of the current ﬁscal year, the Japanese economy

Net Sales(Millions of yen)saw a moderate increase in personal consumption due to rising prices as

Net Sales

30,33330,000the economy normalized. In the global economy, though inﬂation is

Operating proﬁt to

Operating proﬁt to
net sales ratio
net sales ratio 34,500(forecast)（％）

12

27,30024,4798

20,000trending downward, the US economy has remained steady, with the

5.3interest rate differential widening and resulting in the depreciation of the

15,386

4

10,000
3.4

3.4

yen against the dollar. In addition, China has been dealing with a real0estate problem and concerns about the economy ahead.
Amid this situation, the group achieved net sales of 15,386 million yen (up1.7
FY2020

FY2021

FY2022

Ordinary Proﬁt and Ordinary to Total Assets Ratio

5.9% YoY) due to increased sales overseas and a rise in selling prices acrossOrdinary proﬁt(Millions of yen)

the board. Operating proﬁt signiﬁcantly increased to 528 million yen (upOrdinary proﬁt

2,011

1,600(forecast)

1,500

quarterly proﬁt attributable to owners of parent reached 569 million yen

Overseas sales
Overseas sales ratio

Overseas sales
ratio（％）

13,214 (forecast)

11,492

75

40
38.4

36.1

50

37.9
5,889

4,000

Annual dividend per share
Payout ratio
Payout ratio（％）

Annual dividend
per share(Yen/share)

50

8,841

8,000

Annual Dividend per Share and Payout Ratio

40

30

38.3

40

FY2020

FY2021

FY2022

FY2023

40

74.0

60.4

20

25
0

0

20

20.8
FY2020

FY2021

FY2022Equity(Millions of yen)

20,000120

15,000

90

6.1
3.4

FY2021

FY20220

FY2023Equity and Rate of Return on Equity (ROE)

150

EquityRate of return on equity
17,962

18,533Rate of returnon equity（％）

19,364 (forecast)20

15,89915
10.7

10,000

10

60
59.3

10
0

45 (forecast)

FY2020

10

933

7.4
4.2

0

10,484

1,046

1,030

(up 13.0% YoY).

12,000Ordinary proﬁt tototal assets ratio（％）

20

ordinary proﬁt amounted to 933 million yen (up 10.4% YoY), and theOverseas sales(Millions of yen)

Ordinary proﬁt tototal assets ratio

3,000

78.8% YoY). However, due to a decrease in foreign exchange gains,

Overseas Sales and Overseas Sales Ratio

0

FY2023（forecast）30

FY2023

0

5,000
0

3.4

3.3
FY2020

FY2021

FY2022

3.7

5（forecast）

FY20230

Segment Information
By Division
Energy Device Materials

0.4%

Others

5.5%

By Region
US

Functional Fluids

4.5%

50.3%

Others0.8%

Japan
Hot Melt
Adhesives

24.1%

27.3%
FY2023
2nd quarter: Sales by division

FY2023
2nd quarter: Sales by region

billion yen

billion yen

15.4

15.4

China

8.9%

Liquid parafﬁne& Sufonates

12.6%

61.7%

Asia (excl. China)

Synthetic Lubricants

3.9%

Information on Shareholder Beneﬁts
We at MORESCO would like to extend our sincerest thanks to all of our shareholders. To show appreciation for thecontinued support of our shareholders, we offer the following shareholder beneﬁts. We hope for the continued supportof shareholders as we do our utmost to strive for further growth to meet their expectations.

Shareholder Beneﬁts

Timing of Beneﬁt Delivery

Number of shares held and continuous holding period

Shareholder Beneﬁts

Beneﬁts will be mailed in late May of each year, enclosed with the business report.

300 shares or more and less than
3 years of continuous ownership

QUO Card worth 3,000 yen(How to conﬁrm the length of time MORESCO shares have been held)

300 shares or more and 3 or more
years of continuous holding period

QUO Card worth 4,000 yen

Shareholders who wish to conﬁrm the holding period of theirshares are asked to contact the following number and request acertiﬁcate of share transfer.

Beneﬁts are available to shareholders who hold three units (300 shares) or more of the Companyʼs stock and are listed orContact information: Osaka Corporate Agency Division, Mitsubishi

recorded in the shareholdersʼ register as of the last day of February every year.

UFJ Trust and Banking Corporation

A continuous holding period of three years or longer is contingent on the same shareholder number being listed or recordedin the shareholdersʼ register as of the last day of February and the last day of August seven or more times consecutively.

Phone number: 0120-094-777 (toll free)
Hours: Weekdays 9:00-17:00, excluding Saturdays, Sundays, national

Should a shareholder holding fewer than 300 shares make an additional purchase so that
their number of shares is 300 shares or more as of the last day of February, the period in whichfewer than 300 shares were held will also be included in the continuous holding period.

holidays, etc.

Company Proﬁle and Stock Information (As of August 31, 2023)■Company ProﬁleShareholder Memo

■Situation of Stock■Fiscal year

Company name

MORESCO Corporation

Total number of authorized stocks :20,000,000

Establishment

October 27, 1958

Total number of stocks outstanding:

9,696,500

Capital2,118,294,000 yen

Number of shareholders

Number of employees

385■Head Ofﬁce and Business Ofﬁces
Head Ofﬁce & R&D Center

5-5-3, Minatojimaminami-machi, Chuo-ku,:

BranchTokyo Branch, Osaka Branch■Distribution of Sharesby Shareholder

Sales Ofﬁce

Nagoya Sales Ofﬁce

PlantsChiba Plant, Akoh Plant

4.78％

49.55％(In the case of interim dividends)■Ordinary General Meeting of Shareholders

Foreign corporations, etc.

■Administrator of shareholder registry and account

3.31％
Stocks outstanding
Total number of stocks

9,696,500stocks

Financial Institutions

10.98％

30.90％

Mitsubishi UFJ Trust and Banking Corporation
3-6-3 Fushimi-cho, Chuo-ku, Osaka-shi, Osaka 541-8502 Japan
Telephone: 0120-094-777 (toll free)■Listed Stock Exchanges
Tokyo Stock Exchange

CEO, Representative Director, President

Nobuhiro Sewaki

COO, Director, Senior Managing Executive Ofﬁcer

Yasuo Sakane

CTO, Director, Managing Executive Ofﬁcer

Hirofumi Fujimoto

CFO, Director, Senior Executive Ofﬁcer

MATSUMURA OIL Co., Ltd.

1,067,000

11.5%

Hiroko Fuji

Outside Director

COSMO OIL LUBRICANTS CO., LTD.

503,000

5.4%

Mikio Honda

Director, Audit and Supervisory

The Master Trust Bank of Japan, Ltd. (Trust Account)

429,300

4.6%

MORESCO Employee Stock Ownership Plan

405,220

4.3%

NIPPON SODA CO., LTD.

365,000

3.9%

STARLITE Co., Ltd.

326,000

3.5%

Mizuho Bank, Ltd.

250,000

2.7%

Outside Director, Audit and Supervisory

MUFG Bank, Ltd.

250,000

2.7%

Committee Member

Osaka Small and Medium Business Investment & Consultation Co., Ltd.

209,600

2.2%

Shima Trading Co., LTD.

165,000

1.7%

Committee Member
Outside Director, Audit and Supervisory
Committee Member

Hidetoshi Nakatsuka

Mitsubishi UFJ Trust and Banking Corporation■Contact information
Osaka Corporate Agency Division

Other corporations

Motohisa Morozumi

Mikio Nakajo

May every year
management institution for special accounts■Directors

Kazuo Machigaki

August 31

Companies trading in
ﬁnancial instruments

0.48％

Treasury stock

Individuals
and others

End of Feb.

15,165Kobe-city, Hyogo 650-0047 Japan
Telephone: 078-303-9010 (main contact number)March 1 through the last day of February of the following year
■Shareholder Fixed Date for Year-end Dividend Receipt

Outside Director, Audit and Supervisory
Committee Member■Major Shareholders
Name of shareholders

Number of stocks Investment ratio

Method of Public Notice
Public notice will be made electronically.
URL for public notice:https://www.moresco.co.jp/ir/notice.php(In the event of an accident or other unavoidable
circumstances that preclude electronic public notice,
public notice will be given in the Nihon Keizai Shimbun.)

Note: The investment ratio is computed by excluding 463,720 shares of treasury stock.

Caveats◎ Regarding changes of address, purchase requests and any other such procedures, the basic rule is that shareholders are asked to contact the securities company or otherorganization where they opened their account. Note that the administrator of shareholder registry (Mitsubishi UFJ Trust and Banking Corporation) is unable to process
such procedures.
◎ For any procedures regarding shares recorded in special accounts, please contact Mitsubishi UFJ Trust and Banking Corporation, which is the management institution for
special accounts. The Mitsubishi UFJ Trust and Banking Corporation head ofﬁce and branches nationwide will also be able to assist with these procedures.
◎ Dividends that have not yet been received will be paid at the Mitsubishi UFJ Trust and Banking Corporation head ofﬁce and branches.